Vodafone Moot Monster £120bn Merger with Virgin Media UK Parent

Some of Vodafone’s most significant shareholders, each with stakes worth billions of pounds, are putting pressure on the mobile giant to enter into a massive £120 billion merger deal with Liberty Global, the world spanning cable operator behind Virgin Media in the United Kingdom.

Such a deal, which could require Vodafone to sell off their non-European businesses (e.g. India, Turkey and South Africa) for around £30bn and then merge their EU business with Liberty Global, would give the mobile giant access to a massive fixed line network and enable it to better compete with major telecoms operators like BT. The latter assumes BT’s £12.5bn purchase of mobile operator EE is eventually given the regulatory all clear by March 2016.

The speculation follows comments made by US billionaire John Malone, who last week signalled that he might be interested in a merger with Vodafone’s EU businesses and even suggested they would be a “great fit“. But such a deal would take a long time to fully complete and might face some complex regulatory hurdles in different markets.

John Malone, Chairman of Liberty Global, said:

“We’ve looked at that from our side and there would be very substantial synergies if we could find a way to work together or combine the companies with respect to western Europe.

Is there a great fit in Germany? Absolutely. Is there a great fit in the U.K.? Absolutely. Is there a great fit in Holland? Absolutely. There’s the promise of creating enormous shareholder value if we could work it out.”

Meanwhile Vodafone’s CEO, Vittorio Colao, responded by saying that if such a deal could be found to “make sense” then they would consider it. Obviously some of Vodafone’s key shareholders are now so keen that they might well be attempting to use their weight in order to force the operator’s board to at least review the idea.

Mind you it wouldn’t be the first time that Virgin Media or parent Liberty Global have been loosely linked with Vodafone and a similar story surfaced in September 2014 (here), but so far little has happened. The difference this time is that Vodafone’s shareholders are starting to push with their pockets and that’s a difficult signal to ignore.

But such a deal might also unnerved rival mobile operators, specifically O2 and Three UK that over the next year could complete their own merger. Neither operator has a strong independent fixed line telecoms and broadband base, which would put them at a distinct disadvantage against the BT + EE and Vodafone + Virgin Media (Liberty Global) heavyweights.

At the same time approximately one quarter of Vodafone’s sales come from its global corporate networks, which would be hurt if the operator was forced to sell off their non-EU businesses.